Note 8 - Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

NOTE 8 GOODWILL AND INTANGIBLE ASSETS

(a)    Goodwill:

The following table summarizes goodwill activity for the nine months ended September 30, 2021:

(in thousands)	Extended Warranty	Leased Real Estate	Corporate	Total
Balance, December 31, 2020	$ 59,415	$ 60,983	$ 732	$ 121,130
Measurement period adjustment	(18,788)	—	—	(18,788)
Balance, September 30, 2021	$ 40,627	$ 60,983	$ 732	$ 102,342

As further discussed in Note 5, "Acquisition," during the third quarter of 2021, the Company recorded a cumulative net measurement period adjustment, related to the acquisition of PWI, that decreased goodwill by $18.8 million.  

The Company performed a Step 1 impairment assessment for Leased Real Estate at June 30, 2021 based on the sensitivity of interest rates in determining fair value and the impact that the additional borrowing may have on the determination of fair value.  The results of this assessment indicated the fair value exceeded carrying value for Leased Real Estate. See Note 11, "Debt," for further information regarding the additional borrowing.

(b)    Intangible Assets:

Intangible assets at September 30, 2021 and December 31, 2020 are comprised as follows:

(in thousands)	September 30, 2021
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Intangible assets subject to amortization:
Database	$	4,918	$	4,365	$	553
Vehicle service agreements in-force		3,680		3,680		—
Customer relationships		27,645		10,274		17,371
In-place lease		1,125		328		797
Non-compete		266		211		55
Intangible assets not subject to amortization:
Tenant relationship		73,667		—		73,667
Trade names		7,814		—		7,814
Total	$	119,115	$	18,858	$	100,257

(in thousands)	December 31, 2020
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Intangible assets subject to amortization:
Database	$	4,918	$	3,997	$	921
Vehicle service agreements in-force		3,680		3,680		—
Customer relationships		12,646		7,305		5,341
In-place lease		1,125		281		844
Non-compete		266		170		96
Intangible assets not subject to amortization:
Tenant relationship		73,667		—		73,667
Trade names		3,264		—		3,264
Total	$	99,566	$	15,433	$	84,133

As further discussed in Note 5 , " Acquisition ," during the third quarter of 2021, the Company completed and finalized its fair value analysis of the assets acquired and liabilities assumed related to the Company's acquisition of PWI on December 1, 2020.  As a result, during the third quarter of 2021, the Company recorded $19.6 million of separately identifiable intangible assets, related to acquired customer relationships and trade name, as part of the acquisition of PWI. The customer relationships intangible asset of $15.0 million is being amortized over nine years based on the pattern in which the economic benefits of the intangible asset are expected to be consumed. The trade name intangible asset of $4.6 million is deemed to have an indefinite useful life and is  not amortized.  

The Company's intangible assets with definite useful lives are amortized either based on the patterns in which the economic benefits of the intangible assets are expected to be consumed or using the straight-line method over their estimated useful lives, which range from 5 to 18 years. Amortization of intangible assets was $2.4 million and $0.6 million for the three months ended September 30, 2021 and September 30, 2020, respectively ($3.4 million and $1.7 million for the nine months ended September 30, 2021and  September 30, 2020, respectively). 

The measurement period adjustment recorded during the third quarter of 2021 related to the PWI customer relationships intangible asset resulted in an increase in amortization expense of $1.9 million that was recorded during the three months ended September 30, 2021, of which:

• $0.6 million relates to the three months ended September 30, 2021;

• $0.6 million relates to the three months ended June 30, 2021;

• $0.6 million relates to the three months ended March 31, 2021; and

• $0.1 million relates to the year ended December 31, 2020.

The tenant relationship and trade names intangible assets have indefinite useful lives and are not amortized. No impairment charges were recorded during the three and nine months ended September 30, 2021 and September 30, 2020.